This update examines factors that could affect GBP exchange rates this week. The below table shows the market movements for a number of currency pairings in the last two weeks

Currency Pair% ChangeDifference on £200,000
GBP/EUR2.39%€5400
GBP/USD2.64%$6680
GBP/CHF2.69%CHF 6600

The Pound fell yesterday following mixed labour data that paints a worrying picture for the UK. Unemployment data remains tight at record lows of 4.6% combined with just less than three quarter of the people in the UK currently employed, a positive picture for the UK economy. However, in ordinary measures higher employment and a strong labour economy should results in wages for workers increasing. Yesterday, data showed that wages were actually getting worse as inflation becomes a real worry for Bank of England. The reason for the pound's slump yesterday was mainly due to the fact that this economic situation means the public will start to feel the pinch.

Interest Rate Decision Today

Today we have the latest interest rate decision for the UK and following yesterday’s poor data releases I expect Mark Carney, Governor of the Bank of England, to receive some severe questioning as to how he intends to slow inflation and lift wage growth.

Although the interest rate decision is expected to be a non-event, the subsequent monetary policy statement could cause volatility on Sterling exchange rates.

Election Update – Tory/DUP deal postponed due to the Grenfell Tower Blaze and Tim Farron Steps Down

Sources close to the DUP or Democratic Unionist Party yesterday announced that the deal between themselves and the Tory party would be delayed due to the tragedy of the Grenfell Tower Blaze which so far has claimed 12 lives and left many critical in hospital.

Talks are not in trouble however and should commence before the end of the week. I personally believe that whilst a deal remains unconfirmed the pound will remain under pressure. Theresa May now has even less time to form a new minor government with the DUP ahead of Brexit negotiations, which are due to commence in 4 days. Sterling sellers may find themselves in a positive position once the Brexit negotiations start as Theresa May’s plan for a hard Brexit look less and less likely to happen. Getting in contact with your broker will make clear what your best options are.

Tim Farron Resigns

Tim Farron the leader of the Liberal Democrats last night resigned from his post leaving the party without a leader. Mr Farron resigned citing that he’s “torn between living as a faithful Christian and serving as a political leader”. The Lib Dems gained 12 seats in the latest election gaining 4 more than previous, however the vote share fell and the campaign was criticised by several party figures.

If you would like to discuss anything you have read in this report, or would like more information on events that could affect your currency exchange, please call our trading floor on 01494 725 353 or email me directly at brf@currencies.co.uk.

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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.